While announcing that the country’s monetary policy will remain unchanged at 6.75%, the central bank also indicated that the domestic economic is projected to start a gradual recovery this year.
Bank of Namibia governor Iipumbu Shiimi said the recovery of commodity prices will further boost the country’s teetering economy.
According to Shiimi, maintaining the rate is appropriate to support domestic economic growth while maintaining the one-to-one link between the Namibia dollar and the South African Rand.
Many economists expect the central bank to tighten policy later this year as the global economy recovers.
“We need to work hard and take advantage of the changes. We must work hard and support strategic sectors that can propel Namibia to higher growth levels,” he said.
He singled out sectors such as agriculture, tourism, transport as some of the key sectors where investment is needed.
Shiimi however cautioned that “there are still risks on the horizon at global level due to the uneasiness we have seen in the global environment.”
With inflation having averaged around 6.2% in 2017 compared to 6.7% in 2016, it is expected to average around 5% this year.
Namibia’s external current account deficit narrowing considerably in 2017 compared to 2016 because of reduced imports and improved exports.
“Furthermore, as at 31 December 2017, the official stock of international reserves stood at N$30.2 billion, representing an increase, both on a monthly and annual basis. The annual increase mainly stemmed from higher SACU receipts, debt repayments by the Banco Nacional de Angola, as a well as an African Development bank loan. At this level, the stock of international reserves is estimated to cover 4.7 months of imports of goods and services and thereby remains sufficient to sustain the currency peg between the Namibian Dollar and the South African Rand,” said Shiimi.
Shiimi pointed out that the reserves are at a healthy level but cautioned that “it is not a healthy way to build reserves, ideally we would want to build our reserves by exporting more than we import.”
“This can only be attained if we start producing more goods locally and increasing our production capacity,” he said.